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Algorithmic Mechanism Design: Beyond Truthful Mechanisms

Final Report Summary - AMD (Algorithmic Mechanism Design: Beyond Truthful Mechanisms)

The first decade of Algorithmic Mechanism Design (AMD) studied, with great success, the
design of truthful mechanisms for the allocation of resources among agents with private preferences. Truthful mechanisms are ones that incentivize rational users to report their preferences truthfully. For all their theoretical appeal, truthful mechanisms suffer from several inherent limitations, that lead inevitably to large communication and computation complexity overhead in their implementation. Therefore, it is not surprising that practical applications forego truthfulness and use simpler mechanisms instead. Simplicity of mechanisms in itself is insufficient however, because any meaningful mechanism should also have some notion of fairness; Otherwise over time agents will stop using it.

In this project, together with the amazing team of PhD students, MSc students and postdoctoral fellows, we conducted a broad AMD theoretical study that goes beyond truthfulness and focuses instead on the natural themes of simplicity and fairness. We design simple and fair mechanisms that perform at near-optimal levels with respect to important economic objectives such as social welfare and revenue. In some cases, truthfulness is achieved as well.

A prominent example of simple, natural and straightforward mechanisms are posted-price mechanisms. In this project, we significantly advance our understanding of the power and limitations of posted-price mechanisms in various settings. Our work on pricing also advances the theory of “prophet inequality”, which is a theoretical framework related to stopping theory, with interesting implications to markets and pricing.